Rolls-Royce reviews Commercial Marine operation

Rolls-Royce aims to further 'simplify its business, including the evaluation of strategic options for its Commercial Marine operation and a reduction from five operating businesses to three core units based around Civil Aerospace, Defence and Power Systems'.

As part of this plan, a consolidation of its Naval Marine and Nuclear Submarines operations within the existing Defence business, and Civil Nuclear operations within the Power Systems business is considered.

Chief Executive Warren East said: “Building on our actions over the past two years, this further simplification of our business means Rolls-Royce will be tightly focused into three operating businesses, enabling us to act with much greater pace in meeting the vital power needs of our customers. It will create a Defence operation with greater scale in the market, enabling us to offer our customers a more integrated range of products and services. It will also strengthen our ability to innovate in core technologies and enable us to take advantage of future opportunities in areas such as electrification and digitalisation.”

“Alongside the simplification into three operating businesses, we must continue to address the cost and complexity of the structures that support and serve these businesses, including our corporate head office, with greater decisiveness. Taking this action now will help secure the long-term benefit for our business and stakeholders of the growing cash flows that will be generated over the coming years. At the same time, our operational teams must continue to focus on managing in-service issues within Civil Aerospace and delivering the current increase in engine production.”

Since 2015 our Marine business has responded to weak demand for products and services for the offshore oil and gas market, which significantly impacted its profitability. It has divested non-core businesses and reduced the number of sites from 27 to 15 – an overall reduction in footprint of 40%. It has managed a reduction in its workforce by 30% to 4,200, with the majority now based in the Nordic region. At the same time, the business has been investing in new facilities and new technologies.

Regardless of the outcome of this strategic review, Rolls-Royce will retain the Marine operations which supply complex power and propulsion systems to Naval customers, including the Royal Navy and US Navy. During the first quarter of 2018, these Naval operations will become part of an enlarged Defence business named Rolls-Royce Defence, comprising the current Defence Aerospace business and the Nuclear Submarines operation.

Although the potential impact on Rolls-Royce's workforce remains to be quantified, the company does not anticipate any reduction in the skilled operational and engineering roles that are required to support the 'current ramp-up in Civil Aerospace engine production'. "We will honour commitments made to workers’ representatives in the UK and elsewhere, including those which enabled last year’s £150m investment in new and existing Civil Aerospace facilities", a press release reads.

Further details will be given with 2017 financial results, presented in March 2018.